International Business: A Global Approach

International
Business
By Mr. Breitsprecher

Global Economy
• Globalization: Process by which the world
economy is becoming a single interdependent system
• Import: Product made or grown abroad but sold
domestically
• Export: Product made or grown domestically but
shipped and sold abroad
©2017 Mr. Breitsprecher & BreitLinks (www.breitlinks.com). All Rights Reserved Slide 2

Why International Business?
• Governments and businesses more aware of
benefits of globalization to businesses and
shareholders
• New technologies make international travel,
communication, and commerce faster and
cheaper than ever
• Sometimes a firm must expand into foreign
markets to keep up with competitors

Relative National Wealth
• High-income countries
• Upper-middle-income countries
• Lower-middle-income countries
• Low-income countries

Geographic Clusters
• Africa
• Asia
• North America
• South America
• Central America
• Eastern Europe
• European Union
• Middle East
• Caribbean
• Oceania

Trade Agreements
• North American Free Trade Agreement
(NAFTA): Eliminate tariffs and other trade
barriers among the United States, Canada,
and Mexico
• European Union (EU): Major European
nations eliminate or make uniform most trade
barriers affecting group members

European Union
European
Union

Trade Alliance
• Association of Southeast Asian Nations
(ASEAN): Organization for economic,
political, social, and cultural cooperation
among Southeast Asian nations

Association
of Southeast
Asian
Nations

Trade Agreements and Alliances
• General Agreement on Tariffs and Trade
(GATT): International trade agreement to
encourage the multilateral reduction or
elimination of trade barriers
• World Trade Organization (WTO):
Organization through which member nations
negotiate trade agreements and resolve
disputes about trade policies and practices

WTO Goals
1. Promote trade by encouraging members to
adopt fair trade practices
2. Reduce trade barriers by promoting
multilateral negotiations
3. Establish fair procedures for resolving
disputes among members

Major U.S. Trade Partners
Rank Country Exports Imports
Total
Trade
Percent of
Total Trade
blank Total, All Countries 1,489.6 2,149.0 3,638.6 100.0%
blank Total, Top 15 Countries 1,034.2 1,632.7 2,666.9 73.3%
1 Canada 287.8 317.4 605.2 16.6%
2 China 111.8 426.1 537.9 14.8%
3 Mexico 221.4 270.3 491.7 13.5%
4 Japan 61.2 122.5 183.6 5.0%
5 Germany 45.7 113.1 158.7 4.4%
6 Korea, South 40.7 63.6 104.3 2.9%
Expressed in Millions

Major U.S. Trade Partners (cont.)

Major U.S. Trade Partners
Rank Country Exports Imports
Total
Trade
Percent of
Total Trade
7 United Kingdom 49.2 49.2 98.4 2.7%
8 France 28.7 43.1 71.7 2.0%
9 Brazil 39.3 27.5 66.8 1.8%
10 Taiwan 24.5 37.4 61.8 1.7%
11 India 19.7 41.8 61.4 1.7%
12 Saudi Arabia 16.4 44.1 60.5 1.7%
13 Netherlands 40.0 19.2 59.2 1.6%
14 Italy 15.6 38.5 54.0 1.5%
15 Belgium 32.2 19.2 51.5 1.4%

U.S. Imports
& Exports

U.S. Trade
Deficit
situation in which a
country’s imports
exceed its exports,
creating a negative
balance of trade

International Trade
• Trade Surplus: Situation in which a
country’s exports exceed its imports, creating
a positive balance of trade
• Balance of Payments: Flow of all money
into or out of a country

Exchange Rates
• Exchange Rate: Rate at which the currency
of one nation can be exchanged for the
currency of another nation
• Euro: A common currency shared among
most of the members of the European
Union (excluding Denmark, Sweden, and the
United Kingdom)

Competitive Advantage
• Absolute Advantage: Ability to produce something
more efficiently than any other country can
• Comparative Advantage: Ability to produce some
products more efficiently than others
• National Competitive Advantage: International
competitive advantage stemming from a combination
of factor conditions, demand conditions, related and
supporting industries, and firm strategies, structures,
and rivalries

Decision to Go International

International Strategies
• International Firm: Conduct a significant
portion of its business in foreign countries
• Multinational Firm: Design, produce, and
market products in many nations
• Independent Agent: Foreign individual or
organization that agrees to represent an
exporter’s interests

International Organization
Structures
• Licensing Arrangement: Arrangement in which
firms choose foreign individuals or organizations to
manufacture or market their products in another
country
• Strategic Alliance: Arrangement in which a
company finds a foreign partner to contribute
approximately half of the resources needed to
establish and operate a new business in the partner’s
country - also called joint venture

International Organization
Structures (cont.)
• Branch Office: Foreign office set up by an
international or multinational firm
• Foreign Direct Investment (FDI): Arrangement in
which a firm buys or establishes tangible assets in
another country

International Trade
Challenges
• Social and Cultural Differences
• Economic Differences
• Legal and Political Differences

International Trade Barriers
• Quota: Restriction on the number of
products of a certain type that can be
imported into a country
• Embargo: Government order banning
exportation and/or importation of a
particular product or all products from a
particular country
• Tariff: Tax levied on imported products
• Subsidy: Government payment to help a domestic
business compete with foreign firms

Protectionism
• Practice of protecting domestic business at
the expense of free market competition
• Critics charge that protectionism drives up
prices by reducing competition

Legal & Political Issues
• Local Content Law: law requiring that products
sold in a particular country be at least partly made
there
• Business Practice Law: law or regulation
governing business practices in given countries
• Cartel: Association of producers whose purpose is
to control supply and prices
• Dumping: Practice of selling a product abroad for
less than the cost of production

International Business: A Global Approach

International Business: A Global Approach

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